One more broken system
October 28, 2010 by Ken Larsen
Let me add one more broken California government system to those listed in Joe Mathews' blog posting on caforward.org on Oct. 18. His list included the state's initiative process, budget process, and election process, and I add the glaring inadequacies of the state's contracting system with the scores of nonprofits that partner with agencies year in and year out - on-time budget or not - to feed the hungry; teach our children; assist our seniors; and clean up our bays, rivers, and much more. Though not as headline-grabbing as declining donations and government funding cutbacks, the flaws in the contracting system drain our tax revenues as they divert and delay precious dollars needed to meet community needs.
A report from the National Council of Nonprofits released earlier this month highlights the nationwide scope of this problem, calling attention to research by The Urban Institute, which found that our current system of government contracting is “an archaic, cobbled-together, patchwork arrangement” that has undone the nation’s social safety net. According to this research, two problems are particularly acute for California nonprofits:
- "Governments Failing to Pay the Full Costs: When governments do not pay the full costs of services, nonprofits must divert time and resources trying to make up the difference, thus limiting attention on delivery of services to those in need. Governments pay less than it actually costs to deliver the services by, among other ways, denying or severely restricting indirect/overhead/administrative costs that are real, using outdated or artificially low reimbursement rates, requiring matching costs, and imposing unfunded mandates.
- ”Governments Paying Late: Failure by governments to pay their bills when they are due amounts to an unreasonable taking – essentially forcing nonprofits to involuntarily bankroll the government services they provide. This practice increases the cost of providing services, shortchanges the people who are most in need, and forces nonprofits to borrow or raise funds to fulfill the governments’ legal obligations."
At a time when human needs are at their highest level since the Great Depression, California nonprofits find themselves hard-pressed to secure credit, while government agencies are often forced to underfund them for services and delay approving contracts and cutting checks. Facing a “double whammy” of government contract and payment shortfalls plus reductions in charitable and philanthropic giving, nonprofits are looking for solutions that will help them get back on track.
Fortunately the NCN report sets forth a number of simple, straightforward actions that governments at all levels can take, and that will cost little and result in contracting systems that are more efficient and more reliable than the present morass.
- Integrate Procurement Systems: Consolidating contracting, oversight, and payment functions into an integrated procurement system would centralize document management, speed the selection process, standardize contracts, and regulate post-award actions.
- Use a Document Vault: By creating an electronic “file cabinet” to centrally house all documents relevant to bids for contracts, and to which each contracting agency would have access, state agencies could call up information as needed rather than have to maintain their own duplicative receipt, cataloguing, filing, and retrieval processes.
- Streamline Auditing Requirements: By designating a lead agency for conducting audits, repeated and unnecessary audits will be avoided, interruptions in nonprofit program services will be reduced and intergovernmental communications and efficiency will be strengthened.
- Offer Electronic Fund Transfers: Governmental entities should offer payments to their nonprofit contractors through electronic fund transfers (EFT) instead of less cost-effective methods such as credit cards and checks.
As we come to the end of an election cycle, where the cost of government has been in the forefront of campaign debate, those quiet and seemingly mundane tweaks of the contracting process may not be as exciting as promises to lay off public employees, squeeze pensions, and eliminate entire government agencies. But they hold the promise of real long-term positive change for taxpayers, nonprofits, and all Californians.
Ken Larsen has been the California Association of Nonprofits Director of Public Policy since 2001. Previously, he worked for the Friends Committee on Legislation, California Confederation of the Arts and Rural Arts Services, and taught in undergraduate and graduate programs at Southern Oregon College, UC Davis and the University of San Francisco. He currently serves on the nomination committee for the Governor and First Lady's Medals for Service. Ken has served on over two dozen local, state, and national grant and advisory panels, edited six nonprofit newsletters, and co-created the Sacramento area's first region-wide cultural information website.
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